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Employment Protection and Firm Relocation: Theory and Evidence

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  • Dewit, Gerda
  • Görg, Holger
  • Temouri, Yama

Abstract

We examine the determinants of the decision to relocate activities abroad for firms located in OECD countries. We argue that particular firm-specific features play a crucial role for the link between employment protection and relocation. Stricter employment protection laws in the current production location discourage firms' relocation abroad. While larger, more productive firms and firms with higher labour intensities have, ceteris paribus, higher propensities to relocate, they also face higher exit barriers if the country from which they consider relocating has strict employment protection laws. Our predictions are supported empirically, using firm level data for 28 OECD countries.

Suggested Citation

  • Dewit, Gerda & Görg, Holger & Temouri, Yama, 2018. "Employment Protection and Firm Relocation: Theory and Evidence," KCG Working Papers 11, Kiel Centre for Globalization (KCG).
  • Handle: RePEc:zbw:kcgwps:11
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    More about this item

    Keywords

    Employment Protection; Relocation; Multinational Enterprises;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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